Britain’s public borrowing reached a record high again last month as the government’s energy support program cost more and debt rates soared.
The latest figures released by the Office for National Statistics (ONS) show that public sector borrowing in the UK will reach £27.4bn in December 2022, the lowest in December since monthly records began in January 1993. recorded the highest value.
The figure was £16.7bn higher than the same month last year. This is largely due to a surge in spending on energy support programs and rising debt interest rates.
To protect UK households from rising energy prices exacerbated by Russia’s invasion of Ukraine, the UK government launches an energy bill assistance scheme to pay households £400 over six months and a capped energy price guarantee Did. A typical home’s annual energy costs are £2,500.
The scheme cost around £7bn in December, with ONS estimating the government spent £5bn on energy price guarantees and a further £1.9bn on electricity tariff support payments.
Meanwhile, interest payments on government debt jumped from £8.7bn to £17.3bn year-on-year, the highest in December since monthly records began. According to the ONS, the increase in interest payments is primarily due to the impact of retail price index changes on index-linked gold coins.
The government debt interest bill jumped to £87.8bn in the fiscal year to December, with the Office for Budget Responsibility (OBR), the UK’s financial watchdog, estimating it will rise to £115.7bn by the end of the full year in March. doing.
Commenting on the new amount of borrowing, Finance Minister Jeremy Hunt said the government was making “tough decisions to reduce debt”.
“We have already made some tough decisions to reduce our debt and it is imperative that we stick to this plan if we are to halve inflation this year and get economic growth back on track. will create better-paying jobs across the country.”
But the opposition Liberal Democrats blamed the Conservative government’s management of the economy.
Lib Dem Treasury spokeswoman Sarah Olney said:
“A long list of Conservative prime ministers have increased taxes and added hundreds of pounds to mortgages each month, leaving the country with unnecessarily high borrowing costs.”
Public sector debt will reach £2.5 trillion at the end of December 2022, about 99.5% of gross domestic product, according to the ONS.
The December figure lifted borrowings so far in the financial year to £128.1bn, £5.1bn more than in the same period last year.
OBR expects around £177bn of borrowing to occur over 2022/23.
But some experts say the pressure on Britain’s finances will ease.
According to Samuel Tombs of Pantheon Macroeconomics, falling wholesale energy prices have set the government’s energy bill guarantees to be cheaper.
Debt interest payments should start to fall as inflation recovers from recent peaks and interest rates stop rising soon, he added.
Martin Beck of EY Item Club said:
“However, if sustained, borrowing will be well below the £140bn projected by OBR in 2023/2024.”
Jonathan Brearley, head of UK energy regulator Ofgem, said on Monday that the energy price cap could drop below £3,000 as early as April, saving the government billions of pounds in energy support costs. Said I could.
Debate continues within the ruling Conservative Party over how to develop the economy and improve public finances.
Last week, Tory MPs, who support former Prime Minister Liz Truss’ tax cuts, met for the first time as part of a “conservative growth group.”
In a Daily Mail article, former Tory leader Sir Ian Duncan-Smith argued that the country was “already overburdened and clearly cannot get out of recession”.
But Prime Minister Rishi Sunak claimed he wanted tax cuts, but argued that the COVID-19 pandemic and Russia’s war in Ukraine meant he could not yet do so.
During a visit to Lancashire on 19th January, he said: Now this war is underway, and it is having a huge impact on inflation and interest rates. ”
Snack said it would take “a bit of work” to get the financial position “where it should be”.
PA Media contributed to this report.